In an effort to clear up confusion as a result of past decisions, the Texas Supreme Court announced five rules that “address the relationship between contract claims under an insurance policy and tort claims under the Insurance Code.”

The General Rule – An insured can’t recovery policy benefits as damages for an insurer’s statutory violation if the policy doesn’t provide the insured the right to receive the benefits. According to the opinion, the Insurance Code only allows an insured to recover actual damaged caused by an insurer’s statutory violation.

The Entitled-to-Benefits Rule – An insured who establishes a right to receive benefits under the insurance policy can recover benefits as actual damages under the Insurance Code if the insurer’s statutory violation causes the loss of benefits.

The Benefits-Loss Rule – Even if the insured can’t establish a present contractual right to policy benefits, the insured can recover benefits as actual damages under the Insurance Code if the insurer’s statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages for that injury even if the policy doesn’t grant the insured a right to benefits. According to the opinion, this rule applies to “claims alleging an insurer misrepresented a policy’s coverage, waived its right to deny coverage or is estopped from doing so, or committed a violation that caused the insured to lose a contractual right to benefits that it otherwise would have had.”

The Independent-Injury Rule– If an insurer’s statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages for that injury even if the policy doesn’t grant the insured a right to benefits.

The No-Recovery Rule: An insured cannot recover any damages based on an insurer’s statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.